With the United Kingdom set to leave the European Union (EU) in just two days, the UK Financial Conduct Authority (FCA) has issued some guidance on how European regulated financial firms, including Forex and CFD brokers can operate during the so-called Brexit implementation period.
Today, most European registered firms conduct marketing and sales operations in the UK via passporting rights. Considering the new implementation period, the FCA had instructed european firms to apply for temporary permissions to continue to market and sell their services to UK residents during this period. Applications for such temporary measures close today on January 30th, 2020.
While EU registered firms have had these types of nuances, UK registered brokers have had some guidance on how MiFIR transaction reporting and other requirements, as per ESMA, will continue to work. As of today, it looks like UK registered firms will have to continue to abide by the rules set forth in 2018 and continue to report the data required to the regulators.
Yet, it remains to be seen if and when the FCA issues guidance on how such reporting requirements will be expected to be met once (or shall we say “if”) the UK does indeed go away with passporting rights on December 31st, 2020, when the UK is scheduled to officially leave.
UK-based firms operating in Europe may experience additional compliance costs, as they may have to satisfy two regulatory/reporting requirement schemes in the future, if the FCA and ESMA requirements begin to differ or be domiciled in separate regulatory entities. One may conjure that some firms may have already done their research and determined which region – UK proper or EU proper is most cost-effective for them.